In 2020, the Generation Segment’s sales revenue was higher by 2%, as compared to the same period of 2019, primarily due to the higher heat and RES property rights sales revenue (higher sales volume). Generation Segment’s 2020 EBITDA and EBIT were lower than the 2019 results.
The following factors had an impact on the results achieved:
- lower margin on electricity (coal fired units) – mainly due to the lower CDS year on year and the decline of the electricity sales volume. The recognition of the provision set up in connection with the obligation to present the CO2 emission allowances for redemption (retirement) related to (including) 883 thousand Certified Emission Reduction (CER) units, had a significant impact on the CDS in 2019,
- commissioning of the 910 MWe in Jaworzno in November 2020,
- higher margin on electricity (biomass fired units) – due to the higher PMOZE prices, higher electricity prices as well as the higher production volume,
- a swap of the CO2 emission allowance purchase contracts, in the first quarter of 2020 TAURON Capital Group made a decision to change the hedging strategy related to securing the Generation Segment’s retirement needs, involving a one-time swap of the exchange traded contracts with the delivery date in December 2020 to the OTC contracts with the delivery date in March 2021. All of the new transactions concluded on the OTC market will be used for the purpose of performing the retirement obligation by TAURON Capital Group’s generation subsidiaries. The above transactions led to a charge to the Generation Segment’s EBITDA result in the amount of PLN 111 million. At the same time, the completed purchase of the volume with the delivery date in March 2021 from the counterparties on the OTC market, taking into account the decrease of the CO2 emission allowances prices at the time of the transaction, led to the reduction of the costs of TAURON Capital Group setting up a provision for the CO2 emission liabilities for 2020,
- receiving of the financing aid as part of the government anti-crisis shield package program,
- other – mainly: the lower TAMEH result, higher property insurance costs, higher result on the sale of non-financial fixed assets and changes in the provisions year on year.
In addition, the Segment’s lower EBIT was impacted by the higher impairment charges year on year.
Generation Segment’s 2019-2020 results
Export to Excel| Item (PLN ‘000) | 2019 | 2020 | Dynamics (2020/2019) | Change (2020-2019) |
|---|---|---|---|---|
| Sales revenue | 3,428,637 | 3,493,387 | 102% | 64,750 |
| electricity | 3,212,208 | 3,202,512 | 100% | (9,696) |
| heat | 114,636 | 148,246 | 129% | 33,610 |
| property rights related to certificates of electricity origin | 52,196 | 91,538 | 175% | 39,342 |
| Other revenue | 49,597 | 51,092 | 103% | 1,495 |
| EBIT | (509,635) | (2,712,856) | – | (2,203 221) |
| Depreciation and write-downs | 947,749 | 2 885,001 | 304% | 1,937,252 |
| EBITDA | 438,114 | 172,145 | 39% | (265,969) |
TAURON Capital Group recognized, in the 2019 and 2020 results, the booking and reversing of the impairment charges related to the loss of the carrying amount on the balance sheet of the Generation Segment’s cash generating units (CGU), whose total impact on the charge to the Segment’s operating profit reached PLN 635 million and PLN 2,618 million, respectively.
Generation Segment’s 2019-2020 financial data
Generation Segment’s EBITDA along with significant factors affecting the change y/y
Major investments (CAPEX)
The Generation Segment’s total capital expenditures came in at PLN 1,336 million in 2020, including the outlays on the following strategic investment projects:
- PLN 688 million on the construction of the new 910 MWe unit in Jaworzno,
- PLN 239 million on the adaptation of TAURON Wytwarzanie’s generating units to the BAT conclusions,
- PLN 187 million on the replacement expenditures and overhaul components at TAURON Wytwarzanie
- PLN 18 million on the implementation of the heat unit at Łagisza Power Plant,
In addition, the financial costs account for approx. PLN 205 million of the segment’s total CAPEX.
Apart from the above CAPEX, the investment project in Stalowa Wola, with the participation of the strategic partner, PGNiG, was completed. TAURON and PGNiG hold a 50% stake each in the special purpose vehicle that implemented the project that included the construction of the 449 MWe CCGT unit, including the 240 MWt heat generation component. In January 2016, the contract with the general contractor Abener Energia S.A was terminated. In March 2017, thanks to the repayment of the institutions financing the project thus far, the signed amendments to the gas and electricity agreements as well as the agreement on the project’s restructuring came into force. The agreement was reached and the decision was taken on the construction of the backup heat source. In March 2018, financing was obtained from Bank Gospodarstwa Krajowego S.A. (BGK) and PGNiG. As a result of completing a number of analyses, the contract manager formula (EPCM) was chosen. among others due to the project’s advancement level. Energopomiar Gliwice – Energoprojekt Katowice consortium was selected to implement the EPCM project. The project’s implementation was completed in September 2020 and since October 2020 Elektrociepłownia Stalowa Wola S.A. has been operating a CCGT unit with a heating unit and a back -up heat source. The capital expenditures incurred on the project (excluding the financial costs) amount to PLN 1.4 billion.
CURRENT AND FORECAST FINANCIAL AND ASSETS SITUATION
It is expected that the financial situation of the Generation Segment over the next few years will improve, as compared to the current situation, mainly due to the commissioning of the 910 MWe unit in 2020 and due to the revenue from the capacity market. The additional revenue from the capacity market starting from 2021 will allow for compensating the expenditures incurred for the required refurbishments of the generating units in order to adapt them to the BAT Conclusions. In order to improve the results of the segment the activities aimed at improving the cost efficiency thereof will be continued throughout the entire line of business. On the other hand, the demanding market situation and the continuing upward trend of the CO2 emission allowances’ prices carry the risk of the degradation of the 1st degree margin on electricity and heat.
